Inward remittances continue to rise in HCM City

Overseas Vietnamese have sent home remittances of US$1.4 billion through HCM City-based banks in the first four months of this year, a year-on-year increase of 19.6 per cent. — Photo baodautu

by Le Hung Vong

Overseas Vietnamese have sent home remittances of US$1.4 billion through HCM City-based banks in the first four months of this year, a year-on-year increase of 19.6 per cent.

Remittances by overseas Vietnamese during Tet (Lunar new Year festival), which falls between mid-January and mid-February every year, is one of the reasons for the huge remittances in the first quarter, according to Nguyen Hoang Minh, deputy director of the State Bank of Viet Nam's HCM City branch.

Remittances sent through banks in the city were growing by 8-10 per cent annually and were expected to reach $5.3-5.5 billion this year, he said.

According to the Central Institute for Economic Management (CIEM), last year remittances to Viet Nam topped $11 billion.

In a report it released last December, CIEM said with about four million Vietnamese living and working in 187 countries and territories, Viet Nam is now among the top 10 remittance recipients in the world.

Remittances have played an important role in the country's socio-economic development.

In 2004-06 remittances were the biggest source of foreign funds for the country. Since 2007 they have been the second biggest sources behind foreign direct investment.

The remittances bolster the country's foreign currency reserves and help keep the dong stable.

Most of the remittances are spent on daily expenses and business activities or saved, but the usage has been changing.

According to a CIEM study, 48 per cent of the families getting the money are among the top 20 per cent in the country in terms of income. And the high incomes are affecting the spending patterns.

Among those with comparable incomes, families receiving remittances give priority to spending on accommodation and investment in business activities while spending less on food, consumer goods, education, and healthcare.

The group of 20 per cent of the poorest families (receiving remittances) have used these funds for their accommodations while the group of the 20 per cent of the richest have spent remittances as investments into the real estate sector for profits.

The CIEM's study reveals that in 2014 remittances used as investments for business activities slumped to 15.9 per cent (of their remittances) from the 16.2 per cent of the previous five years.

Up to 30 per cent of the remittance receivers deposited their remittances as savings in banks; 27 per cent to 30 per cent for business and service sectors; 20 per cent used remittances on gold trading; and 16 per cent – 17 per cent as investments in the real estate sector.

A CIEM representative said remittances into Viet Nam in 2015 and 2016 are expected to increase slightly from the last year's $11 billion. However, these funds would begin to slightly decrease since 2017.

HCM City pedestrian

Despite poor business for shops on Nguyen Hue Boulevard, rents in the high-rise office buildings and private residences and its surrounding areas have shot up since it became a walking street last month.

Demand for space there is soaring as more companies and individuals are scrambling to open shops on this downtown street, which is often crowded with pedestrians at night.

The owner of a shop in a two-storeyed building on Nguyen Hue said the landlord of the 216sq.m house had hiked the rent from $10,000 a month in the first quarter to $12,000 now.

A HCM City-based real estate consultant said the monthly office rent was $20 per square metre in Harbour View Tower, $24 in Sunwah Tower and $23 in Bitexco Financial Tower.

Other buildings on Nguyen Hue charge $18-20.

The rents are exclusive of service charges of $4-5 per square meter per month.

According to the general director of STS Corporation, Nguyen Xuan Thanh Son, two weeks after Nguyen Hue's makeover as a pedestrian Street (on April 29), rentals had jumped by up to 20 per cent and negotiations for the hikes were underway.

"Both tenants and landlords are seriously assessing the opportunities and challenges on the new pedestrian street [with the higher rentals] before making a decision about renewing their lease contracts," he told VnExpress.

Tenants were at a disadvantage in these negotiations since landlords were fully aware of the street's "incomparable" location, he said.

Overseas investment

As of April overseas investments by Vietnamese firms were $20 billion.

Figures released by the MPI's Foreign Investment Department show that the major investment destinations are "traditional" markets like Laos and Cambodia.

Vietnamese firms have invested $3.9 billion in 259 projects in Laos and $3.2 billion in 171 projects in Cambodia.

They have also invested $968 million in Russia, $1.8 billion in Venezuela, and $1.3 billion in Peru and smaller amounts in Algeria, Malaysia, Myanmar, and the US.

They have poured $5.1 billion into mining and $2.7 billion in agriculture, forestry, and fisheries.

More than 110 of these overseas investment projects with total capital of $5.1 billion are allocated in the mining sector while $2.7 billion are invested in 125 projects in the agricultural, forestry and fishery sectors.

In the last few years Vietnamese firms have also invested in other sectors like IT, telecom, power generation, property, and financial-banking-insurance services.

Besides increases in investments by State-owned firms like Viettel, Vinamilk, and Viet Nam Rubber Group, investment by the private sector, especially small and medium-sized firms, has also been on the rise.

Last year 12.5 per cent of the foreign projects were funded by individuals and 76 per cent by private companies. — VNS